Should a short term consultant incorporate?


2

I have recently been employed as a consultant doing software development for a company based in California (for around $100K). I am a US citizen and I am thinking of incorporating, mainly for the liability and tax benefits. For various reasons, my stint will only last two years or so and I'll be leaving the country, and the corp will be liquidated.

I'm researching LLCs and S-Corps and there's a lot of hassle and expenses involved, and I'm sure liquidating will have its own set of paperwork.

Is it even worth considering incorporating for something short lived as this?

Incorporation

asked Dec 2 '12 at 21:14
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System Down
113 points
  • Two year is not short lived. That is a good time for any kind of corp. – Pradeep 9 years ago

2 Answers


3

For that kind of income and that length of operation, I'd say on a hunch it would be better for you to stay as a sole proprietor. If liability is a concern - get a professional liability insurance (always a good idea for a self-employed).

You have to remember that the IRS requires you to pay a "reasonable" salary, which with the total of $100K means you're unlikely to save any of the SE taxes (the major benefit of S-Corp), but you'll have to pay additional payroll taxes and expenses.

Also, incorporating in CA is pretty expensive ($800/year, even though for corp you get the first year free). Its fairly simple though, but does require additional sets of tax forms every year.

But do consult a professional (legal/tax), this is just an opinion.

answered Dec 3 '12 at 06:20
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Littleadv
5,090 points

2

The answer to your question is highly specific to both the individual's tax situation and the nature of the business.

Discuss this with a tax advisor who is familiar with both personal and business taxation.

Forming and dissolving an entity need not be terribly complicated or expensive. Indeed, some accountants provide formation services for their clients (though they may provide only the most basic paperwork, leaving the rest for the client to do).

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

answered Dec 3 '12 at 04:54
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Dana Shultz
6,015 points

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